Star Group, L.P. Reports Fiscal 2024 Second Quarter Results

Star Group, L.P. Reports Fiscal 2024 Second Quarter Results

GlobeNewswire

Published

STAMFORD, Conn., May 01, 2024 (GLOBE NEWSWIRE) -- Star Group, L.P. (the “Company” or “Star”) (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2024 second quarter, the three month period ended March 31, 2024.*Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023*
For the fiscal 2024 second quarter, Star reported a 9.7 percent decrease in total revenue to $666.0 million compared with $737.6 million in the prior-year period, reflecting a decline in volume sold and lower selling prices for petroleum products. The volume of home heating oil and propane sold during the fiscal 2024 second quarter decreased by 4.0 million gallons, or 3.3 percent, to 117.1 million gallons, as the additional volume provided from acquisitions and colder weather was more than offset by the impact of net customer attrition and other factors. Temperatures in Star’s geographic areas of operation for the three months ended March 31, 2024 were 6.9 percent colder than the three months ended March 31, 2023 but 15.2 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Selling prices decreased largely due to a decline in wholesale product cost of $0.3775 per gallon, or 12.5 percent.

Star’s net income increased by $6.3 million in the quarter, to $68.4 million, as a favorable change in the fair value of derivative instruments of $14.8 million and a $1.2 million decrease in interest expense was only partially offset by a $5.8 million reduction in Adjusted EBITDA and a $3.6 million increase in income tax expense.

The Company reported second quarter Adjusted EBITDA (a non-GAAP measure defined below) of $96.3 million, versus $102.2 million in fiscal 2023, as higher home heating oil and propane per-gallon margins were more than offset by a 4.0 million gallon decrease in the volume of home heating oil and propane sold and a $6.4 million reduction in the Company’s weather hedge benefit compared to the prior year.

“Temperatures in the second quarter were 15.2 percent warmer than normal throughout Star’s footprint. While slightly colder than the same period last year, it was unfortunately not enough to drive higher delivery volumes. However, we were able to mute the impact on adjusted EBITDA, even with a lower weather hedge benefit and some ongoing inflationary pressures, by improving per gallon margins and employing solid expense control,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “As previously noted, we closed on two strategic acquisitions in February on Long Island, and we were able to keep net customer attrition at modest levels during the quarter. We believe we are well prepared for the months ahead and the opportunities summer brings to further invest in our people and business development activity.”

*Six Months Ended March 31, 2024 Compared to the Six Months Ended March 31, 2023*
For the six months ended March 31, 2024, Star reported a 13.8 percent decrease in total revenue to $1.2 billion compared with $1.4 billion in the prior-year period, reflecting a decrease in total volume sold and a decline in selling prices in response to lower wholesale product costs. The volume of home heating oil and propane sold during the first six months of fiscal 2024 decreased by 13.0 million gallons, or 6.2 percent, to 197.3 million gallons as the additional volume provided from acquisitions was more than offset by slightly warmer temperatures, net customer attrition and other factors. Temperatures in Star’s geographic areas of operation fiscal year-to-date were 0.2 percent warmer than during the prior-year period and 14.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income increased by $5.8 million for the first six months of fiscal 2024, to $81.4 million, primarily due to a favorable change in the fair value of derivative instruments of $13.4 million and a $2.1 million decrease in interest expense, partially offset by a $5.9 million reduction in Adjusted EBITDA, a $3.3 million higher income tax provision, and a $0.7 million increase in depreciation and amortization expense. 

Year-to-date Adjusted EBITDA decreased by $5.9 million, to $145.4 million, compared to the prior-year period as an increase in home heating oil and propane per-gallon margins and an increase in service and installation profitability was more than offset by the 13.0 million gallon decrease in home heating oil and propane volumes and a $5.0 million reduction in the Company’s weather hedge benefit.

*EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)*
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of the Company’s financial statements, such as investors, commercial banks and research analysts, to assess Star’s position with regard to the following:

· compliance with certain financial covenants included in our debt agreements;
· financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
· operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
· ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
· the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as analytical tools and so should not be viewed in isolation but in conjunction with measurements that are computed in accordance with GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are as follows:

· EBITDA and Adjusted EBITDA do not reflect cash used for capital expenditures;
· although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;
· EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital;
· EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on indebtedness; and
· EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.*REMINDER:*
Members of Star’s management team will host a webcast and conference call at 11:00 a.m. Eastern Time tomorrow, May 2, 2024. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 888-346-3470 (or 412-317-5169 for international callers).

*About Star Group, L.P.*
Star Group, L.P. is a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. We believe Star is the nation’s largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast and Mid-Atlantic U.S. regions. Additional information is available by obtaining the Company’s SEC filings at www.sec.gov and by visiting Star’s website at www.stargrouplp.com, where unit holders may request a hard copy of Star’s complete audited financial statements free of charge.

*Forward Looking Information*
This news release includes “forward-looking statements” which represent the Company’s expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, pandemic and future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth under the heading “Risk Factors” and “Business Strategy” in our Annual Report on Form 10-K (the “Form 10-K”) for the fiscal year ended September 30, 2023. Important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements”) are disclosed in this news release and in the Company’s Form 10-K and our Quarterly Reports on Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this news release.

(financials follow)

*STAR GROUP, L.P. AND SUBSIDIARIES*
*CONDENSED CONSOLIDATED BALANCE SHEETS*   *March 31,*   *September 30,*
*(in thousands)*     *2024*       *2023*  
*ASSETS*   (unaudited)    
*Current assets*        
Cash and cash equivalents   $ 12,063     $ 45,191  
Receivables, net of allowance of $8,896 and $8,375, respectively     198,280       114,079  
Inventories     63,293       56,463  
Fair asset value of derivative instruments     222       10,660  
Weather hedge contract receivable     7,498       —  
Prepaid expenses and other current assets     28,574       28,308  
Total current assets     309,930       254,701  
Property and equipment, net     106,141       105,404  
Operating lease right-of-use assets     87,834       90,643  
Goodwill     268,360       262,103  
Intangibles, net     81,359       76,306  
Restricted cash     250       250  
Captive insurance collateral     72,811       70,717  
Deferred charges and other assets, net     13,067       15,354  
Total assets   $ 939,752     $ 875,478  
*LIABILITIES AND PARTNERS’ CAPITAL*        
*Current liabilities*        
Accounts payable   $ 37,597     $ 35,609  
Revolving credit facility borrowings     29,239       240  
Fair liability value of derivative instruments     2,189       118  
Current maturities of long-term debt     16,500       20,500  
Current portion of operating lease liabilities     18,030       18,085  
Accrued expenses and other current liabilities     147,796       115,606  
Unearned service contract revenue     72,900       63,215  
Customer credit balances     51,276       111,508  
Total current liabilities     375,527       364,881  
Long-term debt     119,189       127,327  
Long-term operating lease liabilities     74,615       77,600  
Deferred tax liabilities, net     23,207       25,771  
Other long-term liabilities     16,079       16,175  
*Partners’ capital*        
Common unitholders     348,382       281,862  
General partner     (4,544 )     (4,615 )
Accumulated other comprehensive loss, net of taxes     (12,703 )     (13,523 )
Total partners’ capital     331,135       263,724  
Total liabilities and partners’ capital   $ 939,752     $ 875,478  

*STAR GROUP, L.P. AND SUBSIDIARIES*
*CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS*   *Three Months Ended March 31,*   *Six Months Ended March 31,*
*(in thousands, except per unit data – unaudited)*     *2024*       *2023*       *2024*       *2023*                  
Sales:                
Product   $ 595,298     $ 669,212     $ 1,043,848     $ 1,239,141  
Installations and services     70,734       68,405       150,280       146,663  
Total sales     666,032       737,617       1,194,128       1,385,804  
Cost and expenses:                
Cost of product     389,394       466,267       692,732       885,360  
Cost of installations and services     70,592       68,311       145,699       144,854  
(Increase) decrease in the fair value of derivative instruments     (11,752 )     3,022       7,278       20,658  
Delivery and branch expenses     104,085       95,942       198,449       193,878  
Depreciation and amortization expenses     7,748       7,626       16,134       15,463  
General and administrative expenses     6,887       6,698       13,908       13,554  
Finance charge income     (1,253 )     (1,764 )     (2,024 )     (3,083 )
Operating income     100,331       91,515       121,952       115,120  
Interest expense, net     (3,838 )     (4,963 )     (7,056 )     (9,237 )
Amortization of debt issuance costs     (249 )     (258 )     (499 )     (587 )
Income before income taxes     96,244       86,294       114,397       105,296  
Income tax expense     27,870       24,253       33,044       29,716  
Net income   $ 68,374     $ 62,041     $ 81,353     $ 75,580  
General Partner’s interest in net income     620       562       738       684  
Limited Partners’ interest in net income   $ 67,754     $ 61,479     $ 80,615     $ 74,896                                  
Per unit data (Basic and Diluted):                
Net income available to limited partners   $ 1.91     $ 1.72     $ 2.27     $ 2.09  
Dilutive impact of theoretical distribution of earnings     0.35       0.30       0.39       0.35  
Basic and diluted income per Limited Partner Unit:   $ 1.56     $ 1.42     $ 1.88     $ 1.74                  
Weighted average number of Limited Partner units outstanding (Basic and Diluted)     35,549       35,653       35,571       35,786  

*SUPPLEMENTAL INFORMATION*
*STAR GROUP, L.P. AND SUBSIDIARIES*
*RECONCILIATION OF EBITDA AND ADJUSTED EBITDA*
*(Unaudited)*   *Three Months Ended March 31,*
*(in thousands)*     *2024*       *2023*  
Net income   $ 68,374     $ 62,041  
Plus:        
Income tax expense     27,870       24,253  
Amortization of debt issuance costs     249       258  
Interest expense, net     3,838       4,963  
Depreciation and amortization     7,748       7,626  
EBITDA     108,079       99,141  
(Increase) / decrease in the fair value of derivative instruments     (11,752 )     3,022  
Adjusted EBITDA     96,327       102,163  
*Add / (subtract)*        
Income tax expense     (27,870 )     (24,253 )
Interest expense, net     (3,838 )     (4,963 )
Provision for losses on accounts receivable     3,023       3,722  
Increase in accounts receivables     (14,119 )     (9,600 )
Decrease in inventories     21,332       40,326  
Decrease in customer credit balances     (39,763 )     (27,068 )
Change in deferred taxes     (1,165 )     (11,155 )
Change in other operating assets and liabilities     21,202       9,736  
Net cash provided by operating activities   $ 55,129     $ 78,908  
Net cash used in investing activities   $ (23,342 )   $ (2,013 )
Net cash used in financing activities   $ (39,649 )   $ (77,401 )                
Home heating oil and propane gallons sold     117,100       121,100  
Other petroleum products     30,200       33,200  
Total all products     147,300       154,300  

*SUPPLEMENTAL INFORMATION*
*STAR GROUP, L.P. AND SUBSIDIARIES*
*RECONCILIATION OF EBITDA AND ADJUSTED EBITDA*
*(Unaudited)*   *Six Months Ended March 31,*
*(in thousands)*     *2024*       *2023*  
Net income   $ 81,353     $ 75,580  
Plus:        
Income tax expense     33,044       29,716  
Amortization of debt issuance costs     499       587  
Interest expense, net     7,056       9,237  
Depreciation and amortization     16,134       15,463  
EBITDA     138,086       130,583  
(Increase) / decrease in the fair value of derivative instruments     7,278       20,658  
Adjusted EBITDA     145,364       151,241  
*Add / (subtract)*        
Income tax expense     (33,044 )     (29,716 )
Interest expense, net     (7,056 )     (9,237 )
Provision for losses on accounts receivable     3,672       4,768  
Increase in accounts receivables     (87,709 )     (124,764 )
(Increase) decrease in inventories     (5,473 )     11,609  
Decrease in customer credit balances     (61,615 )     (41,768 )
Change in deferred taxes     (2,756 )     (12,379 )
Change in other operating assets and liabilities     43,438       36,413  
Net cash used in operating activities   $ (5,179 )   $ (13,833 )
Net cash used in investing activities   $ (29,217 )   $ (4,099 )
Net cash provided by financing activities   $ 1,268     $ 25,397                  
Home heating oil and propane gallons sold     197,300       210,300  
Other petroleum products     62,500       68,800  
Total all products     259,800       279,100  

CONTACT:  
Star Group, L.P. Chris Witty
Investor Relations Darrow Associates
203/328-7310 646/438-9385 or cwitty@darrowir.com

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